#AskBP 096: What Are Cap Rates and How Are They Calculated?

Expertise: Landlording & Rental Properties, Personal Development, Real Estate News & Commentary, Real Estate Investing Basics, Business Management, Flipping Houses, Mortgages & Creative Financing, Real Estate Deal Analysis & Advice, Real Estate Wholesaling, Personal Finance, Real Estate Marketing, AskBP
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What Are Cap Rates and How Are They Calculated?

Capitalization rates are an important tool that investors use to value income property, but many new investors can feel uncomfortable with the complexities associated with calculating them. In this episode of the #AskBP Podcast, Scott Trench delves into what cap rates are, how they can be calculated, and how to use them in evaluating income property.

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Brandon Turner is an active real estate investor, entrepreneur, writer, and co-host of the BiggerPockets Podcast. He began buying rental properties and flipping houses at age 21, discovering he didn’t need to work 40 years at a corporate job to have “the good life.” Today, with nearly 100 rental units and dozens of rehabs under his belt, he continues to invest in real estate while also showing others the power, and impact, of financial freedom. His writings have been featured on,,, Money Magazine, and numerous other publications across the web and in print media. He is the author of The Book on Investing in Real Estate with No (and Low) Money Down, The Book on Rental Property Investing, and co-author of The Book on Managing Rental Properties, which he wrote alongside his wife, Heather, and How to Invest in Real Estate, which he wrote alongside Joshua Dorkin. A life-long adventurer, Brandon (along with Heather and daughter Rosie) splits his time between his home in Washington State and various destinations around the globe.

    Bobby Eastman from Dallas, Texas
    Replied almost 4 years ago
    Thanks for the explanation man. It was helpful.
    Paul Gonzales Rental Property Investor from San Antonio, TX
    Replied almost 4 years ago
    I totally agree with Bobby, this was really helpful. I may have to go over this video several times. Being a newbie and all. Peace
    Todd Linton
    Replied almost 4 years ago
    Thanks for the KISS approach. Have know the formula for some time but that is the easiest explaination I have ever heard.
    Albert Strong from Fairfax Station, Virginia
    Replied over 3 years ago
    excellent. well organized and clear. thank you
    Tek Chai from Podunk, Washington
    Replied over 3 years ago
    Thanks Scott for your definition of Cap Rate.
    James Sarantinos from Los Angeles, California
    Replied almost 3 years ago
    thanks for this, Nice and simple explanation